Pos Malaysia’s (POSM) 1QFY13 revenue and core earnings of RM311m and RM37m were within both our and consensus estimates, representing 23% and 25% of both our full year numbers. The robust y-o-y core earnings growth of 51% was mainly driven by the courier division, which saw revenue and operating profit surge 35% and 43% y-o-y respectively, boosted by robust demand for parcel deliveries and better route optimization. As the earnings were largely in line, we are keeping our earnings projections, BUY call and RM4.14 FV, based on our SOP valuation, which incorporates the value of five land plots POSM owns, and a 11x FY13 PE. POSM is currently trading at an undemanding 9x PE on our FY12-13 earnings forecasts versus its regional postal peers’ average PE of 14x-16x. Maintain BUY, with a DPS forecast of 20 sen per share, based on a 50% dividend payout ratio. This translates into a lucrative yield of 7%. Maintain BUY.
Well within expectations. As mentioned in our earlier report ‘Eyeing Middle East Courier’ on 10 Aug 2012,POSM’s 1QFY13 revenue and core earnings were within expectations. Y-o-y, revenue, PBT and core earnings rose 9%, 42% and 51% respectively to RM311m, RM52m and RM37m. While the postal group’s core mail division saw marginal 3% y-o-y dip in revenue amid the organic decline in mail volume, this was compensated by the 35% and 43% surge in revenue and profit at its courier business, namely PosLaju, bolstered by resilient consumer spending and hence demand for parcels and documents delivery. In the segment under “Others”, sales of digital certificates, the printing and insertion business, logistics revenue and rental income saw a whopping 333% increase in revenue to RM5m. Of this, sales of digital certificates soared by 150% y-o-y while the revenue from printing and insertion services went up by 10.1%. However, the losses at group’s retail segment, PosNiaga, widened by 40% y-o-y due to higher operating expenses arising from an earlier salary increment as well as higher depreciation charges despite seeing a 7.5% increase in commissions received from Over-the-Counter (OTC) transactions.
Outlook still promising. POSM’s PBT and core income margins were commendable, with PBT margin expanding by 391bps y-o-y and 149bps q-o-q while core earnings margins widened by 332bps y-o-y and 324bps q-o-q. We attribute the strong margins to the impact from the tariff hike, PosLaju’s improved route optimization, and the higher commissions earned by PosNiaga. We are positive on the group’s prospects going forward as we see more synergies between DRB-HICOM and POSM emerging, which may be in the form of:
(i) DRB-HICOM eventually unlocking the value of the five plots of non-FLC land, especially the one in Brickfields, (ii) expectations of a bigger contribution from PosLaju to group earnings by leveraging on one of the two licence holders in Malaysia providing ground handling services to foreign airlines, namely DRB-HICOM’s Kuala Lumpur Airport Service (KLAS), and (iii) POSM’s tie-up with Bank Muamalat and Uni-Asia Life Insurance, which will boost the retail segment by way of high margin fees for OTC transactions at postal outlets, on top of the existing shared banking services (SBS) provided on behalf of RHB and Maybank. We are also positive on POSM’s Ar-Rahnu business, for which the services will be rolled at POSM’s 50 POs in FY13.
Maintain BUY. With the earnings largely in line, we are maintaining our forecasts and reiterating our BUY call, with FV unchanged at RM4.14, based on SOP. POSM is currently trading at an undemanding PE of 9x on our FY12-13 forecast earnings vis-à-vis the average 14x-16x of its regional peers such i.e. SingPost, JapanPost, Deutsche Post. Judging from its strong net cash per share of RM1.15 as at 30 June 2012, we are maintaining our DPS forecast at 20 sen per share, based on a 50% dividend payout ratio. This translates into a lucrative yield of 7%. Maintain BUY.
Source: OSK
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